Introducing Making Tax Digital or MTD

How many times this week have you completed some sort of transaction online? From ordering groceries, to booking cinema tickets, to paying bills; every day millions of us are embracing the simplicity and speed of digital services. Going forward the Government is also embracing technology and is working to modernise the UK’s tax system.

MTD Overview

What we aim to do here is give you an overview of the big picture of Making Tax Digital – we’ll look at what it is, the various strands of the project and a timeline for who will be affected when.

Making Tax Digital is the name of the initiative to transform tax administration through the implementation of a fully digital tax system by 2020. The changes will apply to taxpayers in all walks of life, including most businesses, the self employed and individual personal taxpayers.

The Cornerstones of Making Tax Digital

The government have set out four foundations which need to be in place and work in synergy to bring MTD to full fruition by 2020:

Tax Simplified: HMRC’s vision here is to consolidate the information it holds, by joining up its internal systems and sources culminating in a centralised tax system. In theory you won’t have to give HMRC information it should be able to obtain elsewhere, such as secure data from your employer or bank for example.

MTD for Business: By 2020 the vast majority of businesses will be required to monitor their tax affairs digitally and update HMRC at least quarterly via their digital tax account. These changes will be introduced for some businesses from April 2018. The digital tax system will enable tax to be collected and processed in real time which will allow businesses to be more aware of monies owed and to plan ahead.

Tax in One Place: Currently many taxpayers have to speak to different departments of HMRC about various aspects of their tax affairs – for example someone might have a business but also be employed part-time. The digital tax system will let all taxpayers see a single, personalised, real time view of their overall tax position.

MTD for Individuals: Digital Personal Tax Accounts (PTAs) mean that individuals can already access and update their data at anytime across any device. MTD will also spell the end of the annual self assessment tax return for the majority of personal taxpayers. An online billing system will let individuals pay any outstanding tax when it’s due, or possibly in smaller monthly installments.

MTD Roll-out Timeline

The phased roll-out plan for MTD began in early 2016. HMRC has forecast that by 31st March 2017, seven million taxpayers will have activated their Personal Tax Account (PTA). All 40 million UK tax payers have an account ready for them and just need to sign up.

Here is a summary of the other key milestones to come:

January – June 2017

New online billing system comes into effect.

Taxpayers able to report additional sources of income through their PTA.

Testing for digital reporting of income from letting property.

July – December 2017

Digital tax accounts to show taxpayers an overview of their liabilities in one place.

Automatic tax code adjustments to prevent PAYE under and overpayments.

January – June 2018

Interest paid by banks and building societies starts to be shown in digital tax accounts.

July – December 2018

Most businesses, self-employed and landlords start updating HMRC quarterly for income tax and National Insurance obligations through their accounting software.

Taxpayers who currently report their Child Benefit to HMRC no longer need to do so.

2019

Most businesses, self-employed and landlords start updating HMRC quarterly for VAT obligations through their accounting software.

Capital Gains Tax on the disposal of residential properties needs to be paid within 30 days.

2020

Most companies to start updating HMRC quarterly for Corporation Tax obligations through their accounting software.

The full range of HMRC services are available through digital tax accounts.

Partner with a futureproof accountant

At Boox we were born ready! All our online accounting packages include simple, intuitive software and an interactive app so you can track and manage your business finances on the go across any device. Choosing Boox as your accounting partner is a real opportunity to get your business ready for a digital future.

Got any questions about MTD or Boox accounting?

Contact our friendly Boox team on 0808 1681422.

Written byLynne Gowers

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